Government sell-downs are not profitable exercises for investment banks, particularly in the post-crisis era. The Province of Ontario's C$1.7bn (US$1.3bn) secondary sale of transmission and distribution utility hydro one has been a case in point. Fees earned by the 16 underwriting banks totalled just 3% on shares allocated to retail and 1% to institutions, subject to a 2% cap. The fee arrangement was the same as that on Hydro One's C$1.83bn IPO in October. One difference this time around is that the secondary sale was struck on a risk basis. Another is that the reoffer discount was just 2.1%, a razor-thin buffer for transactions of this size.
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